Write a short note on (i) Horizontal Analysis (ii) Vertical Analysis

1.	Write a short note on (i) Horizontal Analysis (ii) Vertical Analysis
Answer» (i) Horizontal Analysis: Financial statements for a number of years are reviewed and analyzed. Figures for two or more years are contained in such type of analysis and these figures are placed side – by – side to facilitate comparison. Such analysis indicates the increase or decrease in these items not only in absolute figures but also in percentage form. (ii) Vertical Analysis: Financial statements for a single year or on a particular date are reviewed and analyzed with the help of proper devices like ratios. It involves a study of the quantitative relationship among various items of balance sheet or profit and loss account.

Answer»

(i) Horizontal Analysis:

Financial statements for a number of years are reviewed and analyzed. Figures for two or more years are contained in such type of analysis and these figures are placed side – by – side to facilitate comparison. Such analysis indicates the increase or decrease in these items not only in absolute figures but also in percentage form.

(ii) Vertical Analysis:

Financial statements for a single year or on a particular date are reviewed and analyzed with the help of proper devices like ratios. It involves a study of the quantitative relationship among various items of balance sheet or profit and loss account.

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